Sunday, January 31, 2010

79 years of appreciation

A friend of mine made the claim yesterday that we had fifty years of price appreciation in a five year period.

So I went to check it.

From 1950 to 2000 price appreciation averaged 0.5% after adjusting for inflation
From 2000 to 2005 price appreciation averaged 8.2% after adjusting for inflation

I quickly did the math. At the 0.5% appreciation rate, it would take 79 years to cause the amount of appreciation we saw in this bubble. Isn't having smart friends wonderful? he even under-stated how bad it was.

Now, about half of that rise has gone away in the previous crash, but we are still only about half way to historical averages. I have no idea if that will happen from a few decades of flat prices, or a few more years of the crash; the December home sales data looked really bad though, so I don't think this market is done yet.

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